Wednesday, May 1, 2013

Should Apple Buy Or Build A Subscription Service?

I keep wondering whether it makes sense for Apple to expand its iTunes' business to include a subscription model.  For Wall Street, a regular monthly revenue stream from paid subscribers is easy to forecast and certainly increases the connection that Apple can make with its customers.  And Apple has never shied away from new innovation that can possible eat in to old revenue models.  So the threat that a subscription model has on its purchase model shouldn't be an issue either.  And a subscription model opens the doors for Apple to build out its own ad model around the rental business.  Apple has shown itself to be both a hardware and software leader so I keep wondering if Apple is even considering such a strategic move.

I could see three possible scenarios shaping up.  If the intention is to buy, Hulu most certainly could be at the top of the list.  While smaller than others, it has built a growing reputation for original content and usage.  Whether Apple is interested in kicking the tires of this business or another remains to be seen.  Certainly, the business is still a nascent one and Apple could simply build a subscription model from scratch.  With relationships already in place on the purchase side of the business, a library of content could be available quickly.  It may take time to build it as large as Amazon, Netflix, or Redbox, but it is doable. The third scenario would be to partner with one of the current platforms.  A little cash from Apple could go along way in moving a business further ahead of the pack while limiting any downside for Apple.  And adding iTunes as a platform to entry would help to extend reach and performance.  For now, we can only speculate.

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